Empirical Verification of the Accuracy of Valuation Estimates Emanating From Nigerian Valuers: A Case Study of Lagos Metropolis

Abstract

There have been increasing criticisms of the ability of Nigerian valuers to undertake investment valuations in a reliable and accurate manner. This study sought to examine with a view to validating or dispensing the criticisms as to whether Nigerian valuers are capable of undertaking investment valuations in a reliable and accurate manner or not. To achieve this aim, the paper employed quasi-experimental survey methods. Forty five (45) estate surveying and valuation firms were sampled in Lagos Metropolis, the study area. The study used both descriptive and inferential statistics. The study revealed a wide variance of valuation estimates from the sale prices of the twelve properties sampled which indicated that the valuation estimates are not accurate and reliable. The study concluded that the Nigerian Institution of Estate Surveyors and Valuers and Estate Surveyors and Valuation Registration Board of Nigeria (the two bodies responsible for the regulation of the valuation profession in the country) should take up the responsibility of ensuring that variance in valuation is minimised by way of providing databank in order to provide more meaningful valuation advice.

The role of task complexity in valuation errors analysis in a developing real estate market

“…The study established that there was a statistically significant difference between valuations and subsequent transaction prices signifying low valuation accuracy. Several studies including Ayedun et al (2011), Ogunba andAjayi (1998), andOgunba andAjayi (2007) reported similar findings. Furthermore, a perceptual study by Adegoke et al (2013) noted that valuers themselves do not think their valuations are accurate and reliable.…”

Valuation accuracy in the residential property markets in Minna and Abuja, Nigeria

“…Due to the fact that the property market is absolutely local in nature, the practical implications of this study cannot be generalised to other property markets outside Southwestern Nigeria. Ayedun et al (2010) sought to ascertain if valuations conducted by valuers were done in an authentic and uniform manner. The study utilised data from 131 Federal Government privatised properties that were valued by estate surveyors and valuers before their eventual sale.…”

“…In addition, clients influence valuation accuracy in so many ways amongst which are "shopping for valuer" that will apportion the desired value to the appraisal, threatening to withhold payment of fees and closing the door on future patronage (Amidu and Aluko, 2007). Several related studies (Effiong and Mendie, 2019;Ayedun et al, 2010;Udoekanem, 2018) have established the existence of client pressure in the Nigerian valuation industry and how it corrodes the objectivity of valuers as they upwardly adjust values to suit their clients. Besides, a critical review of the studies carried out locally showed that they focussed more on the property markets in Southern Nigeria (Ogunba and Ajayi, 1998;Ogunba, 2004;Ajibola, 2010;Babawale and Ajayi, 2011;Oduyemi et al, 2016;Abidoye and Chan, 2018) in terms of geographical scope and none tested the ability of valuation to predict transaction price in the residential property market apart from Ogunba (2004) and Abidoye and Chan (2018)…”

“…Expert valuers within the courts of United Kingdom have also argued that the acceptable margin of error is around ±5% to ±10% (Crosby, 2000). However, in Nigeria, studies conducted have shown valuations having an alarming margin of error of ±65% and above which is not in agreement with the established and acceptable margin (Ayedun et al, 2010;Effiong and Mendie, 2019). A plethora of factors were noted as instrumental for the stray of values from the tolerable margin of error.…”

Use of Less Relevant Heuristics in Mortgage Valuations in Tanzania

“…A valuation-surveyor provides a value estimate which is a close approximation of the market-price (French & Gabrielli, 2004;Mwasumbi, 2014). However, various researchers have indicated the existence of significant differences between price and the valuation opinions over the same property by different valuers (Parker, 1998;Crosby, 2000;Ayedun, et al, 2011), an observation which raises questions on the reliability of valuation output. In Tanzania, Geho (2004) noted an average of up to 35% deviation between assessed value and realizable market-price of properties located in areas with less vibrant real estate markets.…”